The Moscow Coffee Shop Boom

Daniel Brooks

Demand in Russia for roast and ground coffee, or R&G coffee, is growing. While about 85% of all coffee consumed by Russian (in cups) is instant, more and more Russians are switching to fresh roasted coffee.  About 45,000 tons of roast and ground coffee is consumed per year in Russia with some estimates putting the number at 50,000 in retail and out of home. That is a nice round number, up considerably from previous years.  Expansion of the roast and ground segment exceeds 10% per year and many analysts believe this trend will continue for several years to come despite the many economic challenges facing the Russian economy.

R&G coffee has an advantage that goes beyond the quality of the product itself. Its secret weapon is the growth of coffee shops whose popularity is driving up demand for coffee at retail as well as in hotels, petrol stations, vending machines and at home. After becoming hooked on java in a café, often with plenty of milk added, people are much more likely to drink R&G coffee elsewhere.

Coffee shops have a special place in the imagination of coffee drinkers the world over. Many people enjoy coffee shops so much that they want to own one. Having been in the coffee business many years, I’ve taken part in several trade shows and could not help noticing how many people with no retail or restaurant experience of any kind plan on opening a coffee shop. This is a common phenomenon among starry eyed coffee drinkers young and old. It has gotten so bad that this writer has found himself thinking the same thing and went so far as to register and design a brand. It now sits before me on my desk, waiting to become the next Starbucks or Costa Coffee. All that needs to be done is a bit of research and to take the plunge. Questions remain; what kind of shop to open? How to find a superb location? What is the competition doing? To answer these questions, I have travelled the length and breadth of Moscow, drinking coffee. I wasn’t alone. Many others do the same thing and use coffee shops as their offices, meeting places and places to peer intently at their laptops and smartphones.

Finding a coffee shop or gourmet coffee in Moscow and other major Russian cities is no longer any kind of a challenge. The statistics affirm what any coffee drinker can see with his own two eyes. One study I read compares the number of bars and coffee shops in the top population centres in Russia. Competition from establishments offering alcoholic drinks is stiff, bad pun notwithstanding.  Bars still outnumber coffee shops by 12 bars to 8 coffee shops per 100,000 residents in Russia’s biggest population centres. However, coffee shops are catching up to bars.  In 2015-2016, the number of coffee shops went up 35-40% in Russia’s top cities. This followed about two decades of growth in the coffee shop industry.

The Moscow coffee shop market has split into four broad segments. The market leaders with the longest track record on the market are such chains such as Shokoladnitsa, Kofemania and Kofehaus. These shops offer a wide range of hot and cold food items in a sit-down restaurant, with serving staff.  Pricing is positioned between a pure fast food outlet and a full-scale restaurant.  Another growing segment are self-serve coffee shops that have a limited food range and focus on high quality coffee. The third segment, also growing, is the newer ‘coffee to go’ format.  These are small (sometimes very small) shops that have no seating area and offer coffee to take away. Finally, many coffee shops offer a wide range of baked goods. While these are not coffee shops in the traditional sense, being bakeries, part of the attraction is gourmet espresso.

Frequently, coffee drinkers prefer shops that specialise in coffee and don’t have serving staff.  These have a cumbersome name in Russian which translates as “monoconcept” shops. Another name for this category of cafe is “specialised cafes” which has a better ring to it.  Specialised café chains such as Starbucks, Dablb and Costa focus on selling coffee and a limited range of food items. They usually have friendly Baristas who shout out ‘hello’ and ‘good-bye’ when you enter and leave the shop, sometimes startling customers like this writer who wonders who they are talking to.

The specialised coffee shops are able to increase prices per cup by focusing on gourmet coffee. The average check in these kinds of specialised coffee shops has grown since around 2014 in the range of 20-23%. The absence of servers helps profitability and consumers are happy going up to the counter and getting their hands on their much-needed black gold entirely on their own.  There is no need to ask for the check afterwards. This is one thing I like about self-serve cafes. For some reason, arranging payment can often be a long process and involves making hand gestures and finger rubbing in the direction of the serving staff who are inevitably looking the other way. Self-serve means never having to call out ‘young person’ to the servers again.

The average check in these specialized coffee shops is usually just below 300 Rubles, 30% lower than shops that offer a full food menu. Most customers in these shops purchase about 2-2.5 items per check as opposed to about four items in the full-service coffee shops. The specialized shops have a more limited menu, reducing complexity and operating costs. It is working. Many Muscovites have become accustomed to spending up to 300 Rubles to buy their coffee and a light snack at the counter. In exchange, the shops provide a cool and hip place to sit for hours on end (as I am doing right now), doing important things, such as writing coffee articles.

Often the staff working in the specialised shops are happy to talk about coffee and they frequently know their stuff.  As a result of these factors, these kinds of shops are enjoying increased sales per check over time.

The ‘coffee to go’ segment is growing fastest in terms of total number of outlets. They cost less to open, have lower rents and other operating costs as a percentage of the cost per cup and often offer lower prices for the finished product. Many of these shops are just big enough to contain a single barista. In others, two can be squeezed in. Customers take their coffee with them, something new in this country. In the past, Russians were loath to carry food around with them, having been taught by their grandmothers to sit down properly at a table while drinking hot drinks and eating food. In recent years the dictatorship of Russian grandmothers has eroded. This has happened since the wall fell. Certain bad habits have crept in such as walking around with food. Nowadays coffee drinkers can be seen carrying cups of coffee and even doughnuts in the city, looking like capitalists.

My own unscientific visits to a number of outlets offering coffee to go produced results from mediocre to superb. These kinds of shops have found homes near most of the metro stations around town.  Some are excellent. A few offer food, others focus on coffee with a limited menu.  Many ‘to go’ shops are franchises. If the owner is running the franchise, the chances of getting ahold of a high-quality cup of hot coffee are high, provided the owner hasn’t substituted high quality coffee for lower quality robusta blends to increase the gross margins of the business. The owners of these small shops are often interesting in jawboning about coffee with visiting Americans. Some employed staff are highly competent but not always.  The baristas at times appear to be bored to tears and little interested in manning the coffee maker. It appears to me that finding qualified staff is a challenge for most franchisees and when employees are running the small shops, service can suffer. Such are the risks of franchises and small businesses in general.

One shop I visit regularly near Dinamo stadium provides an Americano for a mere 100 Rubles with hot milk. The coffee was good, the milk was high quality and the woman running the shop was friendly. My luck held out for about three purchases but on the fourth one, it ended. The coffee machine hadn’t been cleaned, leaving a taste of rancid coffee in the cup, and the blend had been changed to something distinctly earthy. I had to give up on that spot.  As a consumer, my message to coffee shop owners would be this. Be consistent. Keep your coffee machines clean. Serve good coffee.

Coffee shops that offer an extensive food menu cater to those who want to spend less money on a hot drink and a light meal than they would in a full restaurant in surroundings that are more inviting than a fast food outlet.  Many of these kinds of outlets offer a diverse food menu. This sector of the coffee shop market was hit hardest by the economic downturn in 2013-2014 and is still struggling to bring profitability back to pre-crisis levels.

Coffee shops that offer baked goods have grown substantially in Moscow. A friend of mine named Ilya specializes in opening such bakeries. He told me the market is becoming over-saturated with coffee shops combined with bakeries. They usually buy frozen, pre-made goods and bake them in ovens on location. Coffee is on the menu but it isn’t the key focus of the shop. They are popular in places like central Moscow where a higher percentage of the population can afford to invest freely in a costly roll or a croissant.  In other parts of the country, most Russians still have the notion that buying a croissant or a cinnamon roll for 100 Rubles or more makes little sense when a high-quality loaf of bread can be purchased for half as much, or less. Nevertheless, Russians love baked goods and prefer to eat a quick, baked snack with their coffee, driving demand for this kind of formats.

Russia is a gourmet coffee country with room to grow. It is now a much more mature market, split into several highly competitive sectors. Judging by the proliferation shops in Moscow, competition for the best locations must be fierce. Finding a fantastic location has to be the biggest challenge facing any new to the coffee shop business. The best locations are under scrutiny by many in the industry, fuelled by both caffeine and real estate expertise, waiting for the best locations to become available. It’s not the only challenge. A Unique Selling Proposition is helpful, finding dedicated and well train staff is a must and convincing Russian consumers to part with their hard earn roubles in the current economy rank high on the list of challenges as well.  I’d rank location towards the top of the list, though.

To get a feel for things going on in the coffee shop industry, a place to visit is a trade show named Coffee Tea Russian Expo. It takes place from 15-17 March at Sokolniki park. The show is popular among wild eyed coffee lovers, roasters, franchisers and coffee shop owners. The excitement at the show is palpable and many of the participants are young. The coming generation are not about to accept the status quo and will challenge the coffee industry with new concepts for many years to come. This is great news for the industry as well as for coffee lovers in Russia everywhere.

Sources: kommersant,,,


Daniel Brooks 26.2.18 © RussiaKnowledge